THE GOVERNMENT will likely tap the offshore market to raise around $1 billion to $1.5 billion in dollar-denominated papers and $1 billion via yen bonds this year, but is unlikely to return to the yuan bond space in the first half as the coronavirus disease 2019 (COVID-19) outbreak continues to affect China’s economy.

“The plan is still there, that about $1 billion to $1.5 billion can also be sourced from the dollar market and another $1 billion (in yen equivalent) from the ‘samurai’ market. But of course, these are things that we have to continue to watch in terms of market developments given where we are right now and also the lingering impact of COVID-19,” National Treasurer Rosalia V. de Leon told reporters Monday.

Ms. De Leon said they are monitoring markets to see if the Treasury can offer all the offshore issuances in the first semester as planned.

“We’re seeing how the market developments are right now in the dollar market, as 10-year (US Treasuries) have plunged to even as low as 0.5%. There’s risk-off sentiment at the moment,” she said.

“We have to see when a good market window would be when there would be more investors who are going to take the chance on emerging market issuances,” she added.

As China continues to suffer the brunt of the outbreak’s fallout, Ms. De Leon said the renminbi-denominated bonds they originally planned to offer this month are unlikely to be issued within the first half.

“For now, wala muna because it’s supposed to be in March, and of course, we are also marking the ‘panda’ market development. So I think we will not be seeing any ‘panda’ issuance at this time, obviously because of COVID-19,” Ms. De Leon said.

Asked if the government could offer these bonds in the second semester instead, the official said they will have to “see in terms of the rates and of course, if there would be opportunities for other markets to be able to make up for possible take-up from the ‘panda’ issuance.”

In the meantime, the National Treasurer said they will take advantage of liquidity in the local market as well as declining interest rates.

“We’re saying nga na good source ang local market for our funding given the liquidity and where the rates are right now, and of course, that would also mitigate foreign exchange risks on our end,” Ms. De Leon said.

The official said due to recent developments, the P1.4-trillion borrowing program for the year may face “some adjustments” amid expected higher spending by the government on efforts to contain the virus, coupled with lower revenues collected by agencies due to a decline in sales and imports.

However, she said the possible increase in borrowings will “not be very huge” as the country’s two largest tax-collecting agencies, Bureau of Internal and Revenue and Bureau of Customs, are expected to “catch up” in the second half after businesses and trade recover from the impact of the virus.

In January, the government raised €1.2 billion out of total bids worth €4.3 billion from its offer of two tenors of euro-denominated bonds, broken down into €600 million each for three-year and nine-year papers.

The bonds carry coupon rates of 0.1% for the three-year bonds and 0.7% for the nine-year, a spread of 40 basis points (bps) and 70 bps over benchmark rates, respectively.

Of the P1.4-trillion borrowing program this year, the government will borrow 25% or around P350 billion from external sources, while the remaining 75% will be sourced from the local market. These will help fund its budget deficit, which is expected to widen to as much as 3.2% of gross domestic product.

The Treasury sold $1.5 billion in 10-year dollar-denominated global bonds in January 2019 priced 110 bps above benchmark rates. The offer was met with strong demand, with total bids reaching $4 billion.

In May last year, the government also raised 2.5 billion renminbi (RMB) or $363.3 million via three-year panda bonds at a coupon of 3.58%. The offer was met with strong demand with total bids reaching RMB11.25 billion.

The Treasury also issued ¥92 billion ($860 million) following a multi-tenor offer of yen-denominated bonds in August last year. Broken down, ¥30.4 billion was raised via three-year samurai bonds at a coupon rate of 0.18%, ¥21 billion from five-year papers priced at 0.28%, ¥17.9-billion from seven-year securities at a 0.43% coupon, and ¥22.7 billion through 10-year bonds priced at 0.59%. — Beatrice M. Laforga